Should You Invest in the Social IPO?

8/30/2013 8:44AM

If you like a company, should you also buy its shares via Facebook? WSJ's Telis Demos joins digits with a look at Loyal3 Holdings, which is hoping to popularize the rise of the social IPO. Photo: Loyal3.

This transcript has been automatically generated and may not be 100% accurate.

... I ... will commit Digits I'm Steve Russolillo ... if you like the company on Facebook should you also buy its shares via Facebook ... WSJ's tell of the most joins us with a look at the rise of the social IPO ... suppose ... also the use of the social IPO during connected by a stock now on base ... well writes of this company told loyal three in what they've done is they've created a platform whereby ... any investor can sign up for an account with them ... and buy stock in a company that they ... could still to find him ... aam they're launching their first IPO Heinz company called Globe and the software company ... in which to be with you is you gotta go through loyalties website war ... go through Facebook ... and um you know that that'll bring you to the loyal three platform sign up he opened account of a minimum pizzeria fifty dollars if the put in their accounts ... and then you can say that I wanna buy IPO in that can accompany me Act is expected Comex prom probably next month asked ... its that easy ... get him a chance and they ... are there concerns of an Odyssey that has been a lot of trading glitches and a lot IPO issues over the past few years now ... it just seems too easy at this point just go log into Facebook you like someone's fix area like ... cats running around and you can buy shares the company was in in theory it is an easy and and that the presence of mind in IPO which is that the way that the markets developed is the most IPO's are sold to big institutions like companies invest in banks ... believes are interested and interest in getting people to spend ... a hundred dollars to two hundred dollars ... to buy into the IPO because it's complicated to get all been signed up because what people don't like to do that what one of three is trying to say is to get people can can can do that can fight like a small among stock ... if they like the company as part of an expression of like a customer loyalty and things like that ... aam ... and definitely you know in the past like a lot of IPO's obviously have to burn small investors people are taken the same risk as they would with any other ... stock aam but the ... the idea here is the least thing if your customer to really like ... a company you know you you you think they're so to you by their clothes like that that you would have it covered its relationship with them ... in you'd like to be like the long-term holding knives interested in light of the IPO one up or down ... on the first day ... in the the idea at least in theory is that you know you you kind of you know ... your relationship with them cuz be on that you'd like to be an owner for the long haul ... but uni on one with the slot money you're not really massive electric stock investor whenever ... that is discernible leader for his commitment to the ... head of the company said it is a bit if analysts thought that the money ... right ... so there have been instances where other companies have done something similar is this right you can take this to ... mean that the less in twenty years has seen a couple if examples of where companies to try to put IPO's into the hands of small investors aam ... I think everybody knows but Goebbels auction IPO that was run you know in part with the Bjork him break the second time in four easy a megastore became famous for this auction model ... that can allow people to ... be a pastry cook small investors big bets on a level playing field re anybody can bid for the stock ... and and theoretically him get an allocation of it ... there been other examples like that nice ninety five company called Boston Beer Jimmy knows the maker of CNN Sam Adams a section set aside ... part of their IPO for ... small investors they should put flyers on pieces of the year ... aam and you know they were able to purchase it at a lower price ... the the IPO then were the big institutions who also pointed to the IPO ... aam there been a couple of other examples like ... in an investment banks which popped up in late nineteen nineties where people could heels you basically can open up a small town ... not a silly like the big brokerage customers which is the way that you know ... if you're not likens to show the way you Ian and I feel now is like if if Morgan Stanley's bring the deal if you were up late eat your broker's a Morgan Stanley broker in your customer ETF have been big account like ... a you have shot the deal now looks like anybody can basically open a small town people try to get ... a little bit here and there in the past um ... but it didn't really take off the silly the recent technology problems ... aam one coming for example bondage in two thousandsix tried to sell ... its stock customers the recent Technology palms of lawsuits to stop so ... you know what what what these guys are saying is that now ... you know with ... with EDA tools like Facebook in and another in a cut of advances in the minutes of ... the notes and messages to millions of people and tell them about stock and make sure that the meal regulatory hurdles they can actually do that now for diesel where people in the TV industry saying about this is this a good idea is this a bad idea since the beginning of a new trend is this one off will worsen the voice is telling ... the lot people the industry don't disagree with the idea that like sure you know IPO's should be a little bit more open to ... more people if they want them if they understand what they're getting into you know with with all those copy apps aam ... but deftly think that people think that the reason I've his work the way they do with diesel to big institutions ... is because ... that is disprove in you know academics of what's in it to to be the best way to sort of make sure that you get ... long-term shareholders and ... you know how to get a reasonable prices set the price of is is not able is neither too low which that something or too high ... instead for investors and so this is been ... a lot of hesitation about changing it now and I think it's ruble for companies for investment banks ... um but I think that that that you now I think you know with technology ... and you know and and with some changes in in in re regulation recently they have the jobs Act with the idea was to ... get more people involved in crowdfunding in things like that I just think that there's been a bit of a philosophical change ... that people are saying that I will see more of them even and maybe it should be a more open process made me would avoid ... the disasters in the future if we were to get yelled smaller people involved so I think this is people are deftly of two minds about